The Hindu Business Line : Rules alone cannot ensure corporate governance: Irani

Speaking at an interactive session organised by the Bharat Chamber of Commerce on the recommendations of the "Dr J.J. Irani Expert Committee Report on Company Law" here, Dr J.J. Irani, Chairman of the panel, and Director, Tata Sons Ltd, said, "Rules will only help, but cannot guarantee results."

Stating that as on May 31, 2005, the panel has officially been dissolved after submission of the report to the Government, he said the members or he himself can, if necessary, write to the authorities on some major changes that may be required, but the Government was now quite free to act in its best wisdom, he added.

He said the Department of Company Affairs was now working on the draft Bill, which would go to the Law Ministry, and then to the Cabinet and finally to Parliament, where it will have to be passed by the Members.

He expected the entire process to be completed by mid-2006, when the new compact set of laws may come into effect, which, appropriately, according to him, would also herald the 50th year of Indian Companies Act 1956.

Clarifying, he said the original Concept Paper on Company Law has now been replaced by the Committee Report, which took more than 20 meetings to take shape, "and the next link in the chain is with the Ministry which is now working on the draft."

Dr Irani said this Ministry, now studying the report, was pretty serious about the proposed changes, as borne out by the "highly cooperative" attitude of the bureaucrats associated with the committee meetings. The report, when completed, did not contain a single dissenting note by any of the members, who comprised representatives of SEBI, legal luminaries and members from other Ministries, he pointed out.

Dr Irani said the driving force was to render Indian Company Law `simple', enabling it to function well in a fast changing, technology-driven globalised environment.

"The present Companies Act is not congruent with the ground realities." We need our corporate laws to be simple, and fully compatible with global practices, he added.

He said there were as many as 300 instances in the existing Companies Act, where corporates need to seek sanction from government authorities. "All that has now been scrapped under the new dispensation, in which governmental interference will be virtually zero." He said the entire responsibility has to be with the shareholders (the real owners of the company), through board supervision.

Describing some of the changes proposed in the report as far reaching, like allowing pyramidal company structures (subsidiary of a subsidiary), Mr Irani said disclosures and accountability have also been greatly enhanced. He said the issue of prolonged liquidation proceedings, which put off foreign investors who have always demanded an exit route, has been addressed adequately where a shorter timeframe has been suggested.

He also pointed out that nominee directors of financial institutions were actually most dependent, sometimes even more than the promoter directors.

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